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Suppose investors in Proctor and Gamble have a 7% cost of equity. Based on Analysts’ forecasts you expect Proctor and Gamble to have earnings per share of $3.80 in one year and earnings per share of $4.20 in two years. After two years you expect return on equity (ROE) to be a constant rate of 16% per year. Every year you expect Proctor and Gamble to payout 75% of earnings as dividends. Additionally, Proctor and Gamble currently has book value of equity per share of $21. What price should Proctor and Gamble trade at today rounded to the nearest dollar? You should assume that after year 3 the sustainable growth rate will be constant, the payout ratio will be constant, and return on equity (ROE) will be constant. Your answer should be numeric only without the dollar sign. (Example an answer of $25.10 would be entered as 25; an answer of 25.50 would be entered as 26)
Determine two to three (2-3) methods of using stocks and options to create a risk-free hedge portfolio. Support your answer with examples of these methods being used to create a risk-free hedge portfolio.
Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your re..
Suppose you invested $60 in the shares Dividend Stock Fund (DVY). It paid a dividend of $0.70 today and then you sold it for $65. What was your return on the investment?
MM Entreprises stock trades for $52.50 per share. It is expected to pay $2.50 dividend at yearend, and the dividend is expected to grow at a constant rate of 5.50% a year. The before tac cost of debt is 7.50% and the tax rate is 40%. The target capit..
You buy 500 shares of stock at a price of $ 38.00 and an initial margin of 60 percent. If the maintenance margin is 30 percent, at what price will you receive a margin call?
Reggie White, a corporate treasure, is trying to decide which of two 1-year securities to purchase: a negotiable CD with a nominal yield of 6 percent or a municipal security with a nominal yield of 4.25 percent. His company s marginal federal tax rat..
ICU inc is a maker of one-way security mirrors for the security industry. The President Seymour Dan Others needs to build a new plant to meet increasing demand.
Laurel Electronics reported the following information at its annual meeting: The Company had cash and marketable securities worth $1,235,455, accounts payables worth $4,159,357, inventory of $7,120,400, accounts receivables of $3,452,400, short-term ..
What is the par value today and what will it be three years from today - Write down the current prime rate, 15-year mortgage rate, the 3 month T-Bill rate and the 5-year T-Bond rate (for the USA). Are you surprised?
This week we discuss the operations of an insurance company. As stated before, the primary technique for risk management is transferring the risk, usually to an insurance company. Ask the risk manager of your company who provides the property insuran..
Which of the following statements regarding operating and cash cycles is true?
Suppose the interest rate on a 1-year T-bond is 5.00% and that on a 2-year T-bond is 5.40%. Assume that the pure expectations theory is NOT valid, and the MRP is zero for a 1-year T-bond but 0.40% for a 2-year bond. What is the yield on a 1-year T-bo..
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